Malcolm Turnbull

Of course, just as arms firms make a lot of money from conventional warfare, there are firms that make a lot of money from currency warfare. One of those firms is Goldman Sachs.

So we wondered what Goldman Sachs makes of it. Last week Goldman Sachs published a note saying, ‘One of the best long term trades out there at the moment is long euro versus short Aussie.’ The big banking firm is so keen on this trade the Wall Street Journal reported someone there tagged it ‘the trade of the century’.

That got Dan Denning over at the The Denning Report thinking. He posed this question to his readers last week:

‘How could this turn into the trade of the century?‘A fall in the Aussie dollar by 50% (against the US dollar, the euro, or both) would do the trick. You’d see the Aussie gold price catch up with the US price. But the currency story would really be a reaction and not the catalyst.

‘The catalyst would be weaker iron ore prices, a falling terms of trade, bigger federal budget deficits, and no other sector of the economy capable of compensating for the end of the mining boom. Australian financial assets would be repriced for the ‘new normal’ I’ve spoken about.’

We hope the new normal for Australia is a bit rosier than that.

Source: Money Morning